European Factors to Watch-Shares seen higher, focus on ECB

Reuters Staff

5 Min Read

LONDON, Nov 4 (Reuters) - European shares were expected to grind higher on Monday, with sentiment buoyed by increased hopes the European Central Bank will strike an equities-friendly dovish tone at its latest meeting this week.

That follows a surprise drop in euro zone inflation to 0.7 percent in the year to October, well below the ECB’s target of just under 2 percent. Both UBS and RBS expect a rate cut at Thursday’s meeting, although others think the central bank will hold fire for the time being.

“There will be plenty of attention on the ECB to see whether they open the door to further policy easing ahead of the next meeting in December in the wake of softer data,” Credit Agricole said in a note.

“We do not expect a rate cut as soon as this week, but ... it cannot be ruled out completely as the ECB is coming under growing pressure to act.”

Investors will also keep a close eye on a raft of data later in the session for hints about the market’s near-term direction. Focus will be on euro zone, German and French manufacturing PMI (purchasing managers’ index) for October at 0858 GMT, 0853 GMT and 0848 GMT, respectively.

UK construction sector PMI for October is due at 0930 GMT, while in the United States, August and September factory orders will be released at 1500 GMT, while the Institute for Supply Management-New York will publish its October index of regional business activity at 1445 GMT.

The earnings season will continue to inject volatility in the market. Focus will be on HSBC, which is expected to report at 0815 GMT a 10 percent rise in quarterly profit as Europe’s biggest bank benefits from cost cuts.

Europe’s largest airline Ryanair said on Monday its annual profit is set to fall for the first time in five years as intense competition in Europe pushes average fares down by around 10 percent over the winter months.

The European earnings numbers have so far lagged recent quarters as well as the U.S. market. According to Thomson Reuters StarMine data, more than half of the STOXX Europe 600 companies have reported results so far, of which 47 percent have met or beaten expectations, against 58 percent in the full second quarter and 52 percent in the Jan.-March period.

In the United States, three-quarters of Standard & Poor’s 500 firms have posted results, of which 73 percent have met or beaten and only 27 percent have missed profit forecasts.

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